Gagfah, the Germany listed residential property company, has confirmed today that it is contemplating bringing to market a circa €625m five-year term CMBS next year secured by German multi-family properties, as part of a wider series of strategies to refinance €2.08bn before next August’s debt maturity.
Plans to issue a CMBS are not definite, but it is considered likely and forms part of a five-pronged refinancing strategy for Gagfah’s maturing €2.08bn debt, as outlined in today’s analyst presentation.
Uni-Credit and Goldman Sachs have been appointed by Gagfah as joint co-ordinators and advisors to determine the feasibility of European CMBS next year, which would likely need to have a comparable cost of debt – or cheaper – than Gagfah’s current all-in interest rate of 4.1% across its existing facilities
Gagfah is understood to be open to either a true sale CMBS, in which the originating banks underwrites the CMBS loan and warehouses the debt on balance sheet before the capital market exit, or an agency-style deal, like the recent Florentia CMBS which Deutsche Bank ran for Vitus Group.
In an agency deal, investment banks take no execution risk on the potential difference between the margin the loan was originated at and the pricing secured for the bonds at placement.
The circa €625m debt would likely be consistent with Gagfah’s company-wide 65% LTV, which implies that the overall German multi-family secured by the new issuance would be around €960m. The CMBS could include a B-note underneath the CMBS as part of the circa €625m total.
In the event Gagfah decides to press ahead with the CMBS option, Uni-Credit and Goldman Sachs are likely to be join bookrunners, although this does not preclude additional investment banks joining the ticket.
While the plans are still fluid and a number of permutations remain in play, Gagfah is understood to be confident that its existing bilateral lenders and CMBS investors will make a next year securitisation viable, with Uni-Credit and Goldman Sachs thought to be in the process of testing market appetite.
The broader refinancing strategy includes just under €100m of debt pay down due to disposals, circa €475m refinanced with pfandbrief banks over a seven-year term, as well as three separate pools to be refinanced with German and international insurance company lenders amounting to around €750m.
The balance, at just less than €150m, will be refinanced in smaller pools and through additional disposals.
Gagfah said in its presentation that the separate collateral pools are structured with similar cash flow and risk profiles, with a broadly even regional split, vacancy rate as well as valuation and current LTV, which will aid staggered refinancing closings over the first and second quarters of next year.
Separately, Gagfah is still running a concurrent strategy over whether to sell the 43,000-strong Dresden multi-family portfolio – which has a guide price and valuation of around €1.7bn – or retain and refinance the portfolio.
Gagfah would decide to retain the Dresden portfolio – also known as the Woba portfolio – if pricing offered for a sale was not deemed attractive enough.
Leonardo & Co, the European investment bank, is advising Gagfah on the potential refinance or sale of the Dresden portfolio, owned by Gagfah’s Dresden Woba unit and the €1.04bn debt securitised in two equally split separate CMBS transactions, Lehman Brothers’ Windermere IX and Deutsche Bank’s Deco 14.